Protection product development
This post consists of three sections:
- My views: effectively an executive summary
- History: the evidence of 20 years
- Future: brief speculation
My views: the wrong priority?
Have you noticed that that, typically, the protection companies writing the biggest volumes seem to place less emphasis on product development than their lower-ranked peers? (They also seem to win fewer industry awards, though it seems not to bother them!)
What follows applies to main IFA market players; Friendly Societies have more restricted ranges and aggregator-only players have fewer product features - this would have to change to become top 5.
I believe the thinking is (and should be):
First, produce reasonable products
Here is my definition of “reasonable” products:
- Life cover and critical illness.
- Level, decreasing and FIB covers.
- A range of income protection offerings.
- The ability to combine benefits in a menu.
- Good (not leading) critical illness definitions.
- Standard guaranteed insurability options.
Then develop competitive advantage
Focus on the areas that deliver volume and profit (if no awards): underwriting and pricing. Low overheads and a growing reputation for protection are followed by partnerships and expansion into related areas e.g. surveying and salary finance. Eventually you copy and paste your UK expertise into other markets. That’s surely more likely to generate success than tweaking products.
Return to product
The best players dominate a market. L&G have added market leadership in income protection to first places in life term and critical illness. I anticipate them increasing their emphasis on (e.g.) blue collar workers, to the chagrin of Friendly Societies.
History: the evidence of 20 years
The problem is that product development is not usually a route to competitive advantage, often the reverse applies; product ideas are in the public domain and the more successful are copied.
Let’s consider three decades:
In the late 1990s Scottish Provident gained genuine competitive advantage from its menu range, supported by (e.g.) its Quotes on Disk system. But everyone copied. Royal London’s updated take.
In the 2000s there were several attempts at Real Life Cover. The fixed structure wasn’t so successful, seeming like an attempt by a smaller (at the time) insurer to secure distribution.
The 2010s saw wellness and value added services. I predict significant extensions to these, targeting wider customer needs. Ultimately traditional protection elements may be seen as quite minor by consumers, even though they generate the insurers’ profit.
The above looked beyond single products, either to structuring whole protection cover or beyond traditional covers. We have also seen individual covers re-designed. So on critical illness we’ve had severity-based payments and more recently simplifications from AIG and Scottish Widows.
The 2021 developments haven’t changed my mind on product; to gain competitive advantage you would have to do something more radical.
Future: brief speculation
I speculate that protection offerings in 20 years will be very different. The core three products are likely to remain, with continued evolution for critical illness. Wellbeing will receive still more emphasis. So far, so obvious? Here’s where things become interesting.
The emphasis will move away from the individual, where you (alone) are responsible for your own personal physical and mental wellbeing, albeit with possible support from (paid) professionals.
Instead we will see a new emphasis on community and group-help. This happens in other walks of life of course, but the protection provider will provide robust systems and oversight. This will be safe, thoroughly enjoyable and effective.
I have a dream.